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The Wine Program of the Future Makes Sense Today

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If you walk into a restaurant wine cellar and see a big room full of expensive stuff that hasn't sold, trust me that you are viewing it in the same way as those many restaurant operators who have forgone large wine programs. The real estate prices and sunk inventory costs associated with big cellars are unappetizing to restaurateurs who are making decisions for businesses dependent on cash flow. Those restaurateurs know that tying up dollars under cork means that they will have less cash on hand to meet their daily expenses. The legal setting in New York requires restaurants to pay for their wine acquisitions within 30 days of delivery, but they have no such certainty as to when those bottles will again be turned into dollars for the house. As a result, restaurants are shrinking their cellars. Less wine means less risk of inventory going unsold and less outlay of budget dollars from the restaurant. But it has also meant fewer choices for the guests at the tables.

There is a more sophisticated remedy that might allow for broad consumer choice as well as smaller inventories, and it has already been used to a large extent by the retail side of the wine business. That is to say, pre-orders. Phantom inventory.

A customer orders what they want in advance of their arrival and pays for it in advance. The restaurant purchases wine using the orders that they already have as the basis for their purchasing. Bottles come in from the wholesaler and go out to the diner, with a greatly reduced amount of time in between purchase and turnover. A restaurant could thus provide a wide range of options while actually maintaining small actual holdings at any given moment. The burden of warehousing would revert to the wholesaler. You might say that this is crazy, that no customer would ever order wine in advance of a restaurant visit, and they might not, UNLESS IT WAS CHEAPER. Significantly cheaper. Maybe 30 percent cheaper. Think about it. The restaurant is guaranteed the sale, and they don't have to store the wine for a long period of time. The restaurant saves on storage space and they have cash on hand before they place their own order. In that setting, they might be willing to significantly shave their margin of profit to encourage more sales. And those savings could be passed on to the consumer.

What about second bottles? Folks might pre-order one bottle of wine to have with dinner, but then decide while eating that they would prefer a second bottle as well. The restaurant could sell them a second bottle from stock on hand for a higher price. In other words, a restaurant would, say, get 35 pre-orders for a particular Brunello for a given week. They would order 4 cases of that Brunello, or 48 bottles to cover the pre-orders and to also have bottles available for second bottle purchases. But those second bottles, which were not paid for in advance, would be sold at the higher, non-discounted rate. The restaurant isn't sure that it can sell them, and they are part of perpetual inventory, after all. So the consumer is encouraged to order more bottles in advance, and lock in the savings.

Which brings us to, what happens if they don't drink the wine? This concerns bottles that have been pre-ordered, but for whatever reason, not opened by the buyer. A restaurant could approach this in different ways, one of which might be to stipulate a certain time window in which the guest could come back and drink the wine which they have purchased. Another way might be to set up a resale market, where customers sell to other customers dining in the restaurant and the restaurant acts as the middle man. The bottle might be sold to another diner and the price of the bottle refunded to the original party once the second sale has occurred. The restaurant might take a fee for this service.

But all this has started to sound complicated, so maybe technology might be counted on to help. Actually tech should probably have come into play a long time ago, and it is a bit shocking that while we conduct most of the rest of our lives on illuminated screens, we would still seem to more associate illuminated manuscripts with wine. iPad wine lists have taken off in very few establishments so far, even though people are obviously quite happy to tap away on their own phones in or outside of restaurants. Which might be the problem. Handing someone a iPad that isn't theirs doesn't have the same feeling of familiarity that someone's own phone does. If you don't think that you have a special attachment to your own phone, try not having it around for a few days. See how that goes. To get around the issue, restaurant wine lists might be offered as downloadable apps, and then the consumer could engage with them on their own device. Of course nobody would go to the trouble of downloading an app to their phone unless they were getting exclusive extras, like a whole bunch more wine options, discounted pricing, or real time inventory updates. But that is just the set of advantages we are discussing. And so maybe consumers just might take the plunge.

If technology were in use to make real time wine list updates, it would very definitely affect another aspect of big wine programs that is daunting to operators: labor cost. The many lawsuits brought by staff of New York restaurants over the last few years have obliged many restaurants to pay sommeliers a salary without recourse to the tip pool. That in turn has changed the market, as operators have turned to younger sommeliers willing to work for less pay. At the same time, wine directors are increasingly being employed by restaurant groups who want the wine expertise to be spread across several restaurants. The reasoning is clear: Hire someone who can train the waitstaff (who are in the tip pool) to serve wine. This makes much more economic sense to employers than the alternative, which is to have a sommelier staff at each restaurant. There are still so many wine directors in New York because there are so many restaurant groups in New York. If more stand alone restaurants were in business, you would see more reliance on wine list consultants, rather than wine directors. Only a relatively small number of restaurants can really support a fully salaried, fully staffed sommelier team.

How might technology help with labor cost? Simple. Right now, as you read this, someone is deleting or adding wines to a wine list file, loading paper into a printer, hitting print, realizing that they put the wrong paper into the machine, canceling, reloading, hitting print again, and then changing out all of the new pages in all of the wine lists in their restaurant. They might take, oh, let's say, two hours of their day to do this. The exact timing depends on how many changes there are to deal with. But it is significant, and it is a regular occurrence. If you contrast all of that to hitting a button marked "Update" and having all of the electronic representations of the list automatically reconfigure, you have big time savings over the course of a week. This should be especially enticing for organizing different wine lists at different restaurant locations: there isn't even the need to be physically present to update the lists.

What about customer assistance? What if someone would like help to order a bottle of wine? That may well take place online, perhaps through video chat, and it might happen before a guest even sets foot in a restaurant. In other words, the entire industry may change in response to the business realities that already confront it. Or it might continue to shrink.
[Photo: Krieger]

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